AGRIBUSINESS, PROPERTY & CONSTRUCTION

Food firms meeting the challenge

Shares in two sectors would be good long-term investment, says analyst, but low liquidity means limited availability

By WORANUJ MANEERUNGSEE


The outlook for listed food AGRIBUSINESS exporters in 2006 is unlikely Market Cap: 69,233 m bt to match that of the rest of 51.2% the stock market because major players in the agri19.2% 15.9% business and food and beverage sectors 9.4% face several external challenges.

The two sectors -- dominated by companies with large market capitalisation FOOD & BEVERAGES such as Charoen Pokphand Food Plc (CPF) and Thai Union Frozen Plc are at risk from factors such as the fear of bird flu across Asia and Europe and trade measures, such as the US antidumping duty on prawn exports.

Analysts and investors are underweighting both sectors, largely due to a lack of also fall in the first quarter due to floods liquidity. Shares mostly belong to com- in the South and the low season. pany founders, in particular, companies He predicted that bird flu would only with small market capitalisation. There- affect the firm in the short-term and fore, there is a limited number of stock said that the company projected at least with outstanding performances in terms a 10% sales growth in 2006 from about 110 billion baht in 2005. of total shareholder return (TSR).

Shares in these sectors would be good long-term investments with lucrative baht selling off 17.5 million shares in dividends, said an analyst at Philip Secu- Makro cash-and-carry store chain to its rities, but low liquidity meant few would operator, Siam Makro Holding (Thailand). The lowest one-year TSR in the agribube for sale.

The performance of both sectors in siness sector belonged to rubber firm Sri 2005 was outstanding, compared with Trang Agro-Industry Plc (STA), which had a market

Despite shrimpers' complaints that they need more government help, in light of factors such as the US anti-dumping duty, exports are faring well.
capitalisation of the SET average of 20.2%. 2.2 billion baht, at -53.2%. One-year TSR scores for the Although the rubber price food and beverage and agriwas very high last year, traders business sectors were second suffered losses from poor and third best, respectively, speculation in the third quarof the SET's 27 sectors. ter.

Healthcare topped the same fate. Thai Rubb Latex table with a one-year TSR of Plc, capitalised at 194 million 57.9%. The food and beverage baht, ranked the second worst sector had five-year TSR of in terms of one-year TSR. 37.8%, better than the SET The firms had predicted that average of 32.6%, while agrirubber prices would peak in business had a five-year TSR Adirek: Bird flu impact will be short-term July so they sold, but the rising of 19.2%.

Of the 20 listed companies ``Our one-year TSR was poor because in the agribusiness sector, CPF accounted for around two-thirds of the total market of a drop in share price rather than a low capitalisation of 69.2 billion baht, with dividend. We paid 25 satang per share the second highest one-year TSRs at this year,'' the source said. The rubber price was gaining mome76.5%, better than the sector's average of 51.2%. While its five-year TSR was ntum this year so it would be more careful 18.1%, lower than the 19.2% average. with price speculation. Of the 21 companies in the food and Thailuxe Enterprise (TLUXE) had the beverages sector, Agripure Holdings Plc highest one-year TSR at 94.7%.

Analysts at KGI securities and Kim (APURE), with market capitalisation of Eng Securities said that CPF's perform- 765 million baht, was the best performer. It had a 175.7% one-year TSR and a ance this year would not be as good as the year before.The new wave of bird flu 15.6% five-year TSR, while the industry in many countries, including those in average was a one-year TSR of 51.9% Europe, has affected chicken consump- and a 37.8% for five years. APURE gained only 10 million baht of tion and price. The company could see sales drop in the first quarter

Bird flu has raised awareness among processors for improved standards to add value to products.
of this profit last year, but there was a lot of year. However, they predicted a recovery company share speculation. Thai Union Frozen (TUF), with 26 bilin the second and third quarters.

Adirek Sripratak, CPF's president and lion baht market capitalisation, or nearly chief executive officer, agreed with the one-third of the market's 84.2 billion analysts and said pressure from the out- baht overall, had a one-year TSR of 29.4%, break in Thailand and Turkey would erode lower than the industry average. TUF reported a lower-than-expected local consumption. Prawn sales could also fall in the first quarter due to floods in the South and the low season. He predicted that bird flu would only affect the firm in the short-term and said that the company projected at least a 10% sales growth in 2006 from about 110 billion baht in 2005.

CPF gained a profit of 899 million baht selling off 17.5 million shares in Makro cash-and-carry store chain to its operator,SiamMakroHolding (Thailand).

The lowest one-yearTSRinthe agribusiness sector belonged to rubber firm Sri Trang Agro-Industry Plc (STA), which had amarket capitalisation of 2.2 billion baht, at -53.2%.

Although the rubber price was very high last year, traders suffered losses from poor speculation in the third quarter. Other exporters shared the same fate. Thai Rubb Latex Plc, capitalised at 194 million baht, ranked the second worst in terms of one-year TSR.

The firms had predicted that rubber prices would peak in July so they sold, but the rising price did not stop.

‘‘Our one-year TSR was poor because of a drop in share price rather than a low dividend. We paid 25 satang per share this year,’’ the source said.

The rubber price was gaining momentum this year so it wouldbe more careful with price speculation.

Of the 21 companies in the food and beverages sector, Agripure Holdings Plc (APURE), with market capitalisation of 765 million baht,wasthe best performer.

It had a 175.7% one-year TSR and a 15.6% five-year TSR, while the industry average was a one-year TSR of 51.9% and a 37.8% for five years.

APURE gained only 10 million baht of profit last year, but there was a lot of company share speculation.

Thai Union Frozen (TUF),with 26 billion baht market capitalisation, ornearly one-third of the market’s 84.2 billion baht overall,hada one-yearTSRof 29.4%, lower than the industry average.

TUF reported a lower-than-expected net profit for the fourth quarter last year, largely due to rising interest rates and income tax in the US, according to KGI Securities. These two factors would have less impact on TUF this year because they would be offset by rising income from its US-based companies. KGI was still recommending investors to buy TUF shares for long-term investment purposes.

With regard to TSR consistency, analysts could argue Minor International Plc (MINT) also performed well. Accounting for one-fifth of total market capitalisation, MINT had a one-year TSR of 153.6% and a five-year TSR of 67%. It recorded a net profit of around 1.3 billion baht in 2005.

MINT plans to expand through acquisitions, franchises and hotel management services, while maintaining its highgrowth over high-yield policy. `

`Investors who look for high-yield stock should buy shares of electricity supply companies rather than MINT. We'll focus on our company's growth, while maintaining dividend growth as well,'' said the group's chairman and CEO, Bill Heinecke.

The poorest performer was Food & Drinks Plc (F&D) with a one-year TSR of -47.2% and a five-year TSR of 13.2%.
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